I consider the options that governments have in the setting of monetary and fiscal policy with and without adoption of the euro. I argue that some issues, such as the role of ender of last resort, have not yet been satisfactorily addressed by the European Central Bank. But on balance, the...

This paper deals with dynamic adjustment in large economies to changes in the rate of capital income taxation or in the rate of investment tax credit in one country. The framework applied in the paper is a continuous-time, overlapping generations model with two countries. It features population...

The Colombian Economy grew 7,5% in 2007, the highest growth rate since the 1970's. The traditional productive sectors and the great expansion of domestic aggregate demand have been the main sources of growth. However, the major inflationary pressures along the year led to the unfulfillment of...

Dual inflation takes place when prices increases in non-tradable goods are higher than those of tradable goods. In this paper, we develop a model where public spending has a positive externality on the production of those sectors. The main results suggested by the paper are the following: 1)An...

This paper explores the consequences of introducing a monopolistic competition in a two-sector open economy model. The effects of fiscal and technological shocks are simulated. First, unlike the perfectly competitive framework, the present model is consistent with the saving-investment...

The impact of fiscal stimulus depends not only on short-term tax and spending policies, but also on expectations about offsetting measures in the future. This paper analyzes the effects of an increase in government spending under a plausible debt-stabilizing policy that systematically reduces...

In this paper we study jointly optimal ¯scal and monetary policies in a small open economy framework with capital and sticky prices. We consider the case of distor- tionary taxes on labor and capital, and no public debt. As in a closed economy set{up, in the steady state, the optimal in°ation...

n this paper we analyze the role played by fiscal sustainability shocks on the Bolivian economic growth performance. To do this, we impose restrictions on a VAR for the Bolivian economy that allow us to identify fiscal sustainability shocks. We argue that imposing long run identification...

This paper presents a framework to assess the likely impact of fiscal austerity in the Euro area, as a response to the turmoil in the financial markets. We provide some evidence on the sequence of events which generated public deficits and debts, and show that rising debts and deficits were the...